Cambridge International Advanced Subsidiary Level and Advanced Level 9707 Business Studies November 2015 Principal Examiner Report for Teachers

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1 Cambridge International Advanced Subsidiary Level and Advanced Level BUSINESS STUDIES Paper 9707/11 Short Answer/Essay Key messages Any Section A question that asks for explanation requires more than a statement of relevant fact. The importance or significance of relevant factors must be explained. Candidates must take care when reading the questions in order to ensure that they respond correctly. This is just as important when answering Section A questions as the essay question in Section B. Time must be allocated carefully during the examination and candidates should not write answers that are too lengthy in Section A which can result in insufficient time being available to be able to write a sufficiently detailed essay. General comments Most candidates demonstrated a good range of knowledge of the Business Studies content indicating teaching and revision of the whole syllabus. Candidates should ensure that they are familiar with the format of the examination and that they understand how many questions need to be answered. A small number of candidates answered all three of the essay questions. This usually results in three answers that lack the insight and depth. Some candidates answered only part or part of Question 5 or Question 7. If Question 5 or Question 7 is chosen then both parts must be answered. This type of error possible stems from a lack of knowledge of the structure of the examination paper. Section B requires candidates to demonstrate their analytical and evaluative skills. While there are a large number of candidates who offer effective and relevant analysis, it is a much smaller number who offer an evaluative comment. It should also be noted that any judgements made should relate specifically to the question set and, if appropriate, to the context given in the question. Comments on specific questions SECTION A Question 1 Most candidates showed at least some understanding of what a contract of employment is. Good answers defined this as a legal document outlining the terms and conditions of employment and said that it is signed by both the employer and employee. Some answers gave a less precise response and merely made reference to what employees were expected or do or to the rules and regulations that should be followed. A good answer had the notion of a binding agreement between the business/employer and employee. Most candidates were able to offer two advantages to employees of having a contract of employment with only a small number giving advantages to employers. A small number of candidates merely stated two advantages which limited the marks that could be awarded because the question asked candidates to briefly explain. The most common advantages identified were that it gives some security to employees in that they know how much they will earn and that they have some protection against unfair dismissal. The explanation given was that if the employer failed to honour the contract the employee would be able to have redress in law if the employer breached the conditions in the contract of employment. Many candidates answered this question very well.

2 Cambridge International Advanced Subsidiary Level and Advanced Level Question 2 Answers to this question varied greatly. Good answers defined buffer inventory as being the stock kept in case of an emergency such as an unexpected increase in demand or a failure in suppliers delivering supplies to a business. Some candidates defined re-order level of inventory instead of buffer inventory. A small number of candidates described inventory and ignored buffer completely. This was answered well by the majority of candidates. The most common reason given was that a business needs to ensure that it has sufficient inventory to meet customer demands and that failure to do that would result in a loss of customers. Another popular reason was to make sure that inventory remained in good condition, with a frequent example of perishable goods being given together with the need for it to be sold while fresh. Question 3 Good answers to this question recognised the context of a tertiary sector business. Many candidates correctly described differentiation as being means of making your service distinguishable from your competitors and making it stand out as being unique. The reasons given for why this might be done were often given as being to attract more customers, to secure an increased market share and to enable premium prices to be charged. Strong answers gave explanation in context. However, a significant number of candidates who did understand differentiation failed to write their answers in the context of tertiary businesses. Question 4 This was answered well by the majority of candidates. Most answers correctly defined retained profit as being the profit left after all deductions including tax and dividends have been made and the remainder is then available to be kept or reinvested in the business. Some candidates gave a very vague response by saying that retained profit was what was left after expenses have been deducted. Such responses were describing operating profit not retained profit. This question required candidates to understand the difference between capital and revenue expenditure and then to identify sources of finance appropriate for that type of expenditure and for a partnership. As the question relates to a partnership the issue of shares was not accepted as a valid source of finance. Similarly, as the question refers to capital expenditure, short term sources of finance such as overdrafts were not accepted. Relevant answers frequently suggested that long term bank loans could be arranged and also explained that these would have to be repaid with interest and would require payments over a long period. Other valid suggestions included the introduction of a new partner, using hire purchase or leasing to acquire new equipment or arranging a mortgage if the capital expenditure was to acquire additional buildings. Question 5 This question required candidates to discuss the usefulness of primary market research in the context of a new business. Candidates who chose to answer these questions showed a good understanding of what primary market research is and the reasons why different methods might be used. However, the majority of candidates ignored the context in the question and wrote only in general terms about primary research. Good answers addressed the context of a new business and also analysed reasons why primary market research might be important. This was sometimes achieved by contrasting the amount and type of information that an established business might have about consumers and the market compared to a new business. Good answers explained the need to establish the needs and wants of customers to avoid launching an unwanted product or of setting up the business in the wrong place. A focus for analysis in such answers was often the need to reduce the risk that is present when a business first starts up. This part of this question was less well answered. The question required candidates to focus on ways in which a business could make sure that any market research expenditure was cost effective. Weaker candidates focused on market research and offered little explanation or knowledge of cost effectiveness. Good answers identified the need to plan and set objectives so that time and money would not be spent on research that was unlikely to yield useful information. Other ways included making sure that the cheapest methods of market research were used with the stronger candidates adding some analytical comment about the fact that cheap methods were

3 SECTION B Question 6 Cambridge International Advanced Subsidiary Level and Advanced Level only justified if they could produce useful results. This argument frequently led to a debate about the effectiveness of primary market research compared to secondary market research. It was disappointing that there were very few candidates who attempted any evaluation when answering this question. The type of response to this question was frequently the advantages and disadvantages of employee participation. This approach was valid but needed to have analysis that focused on the desirability of employee participation in a profit maximising business; the profit maximising context in this question was ignored in the majority of answers. A good response to this question outlined the reasons why employee participation might be beneficial and how it might help a business to achieve profit maximisation and then presented reasons why employee participation might detract from the potential to profit maximise. Very strong answers also pointed out that the benefits might not be felt in the short term but that in the longer term businesses adopting this approach might gain the benefits of loyal staff and highly skilled workers wanting to join the business. Some responses linked employee participation to motivation but then failed to develop the discussion in terms of how this might impact on a business achieving profit maximisation. The majority of answers to this question had very limited, if any, analysis and rarely offered any evaluation. Candidates must not be tempted to write about Business Studies content that they are familiar with if that is not what the question is asking for. Question 7 The majority of candidates answering this question showed a good understanding of ethical and unethical behaviour and were able to give several examples of each. Candidates discussed many valid reasons why businesses might not behave ethically. Many identified the focus on profit as a common reason and that the cost of behaving ethically often prevented businesses from achieving their profit objective. Reasons given for this included the cost of buying environmentally friendly equipment or of disposing of waste products appropriately. Some good answers also included analysis of the culture of different organisations and/or countries and how this might impact on whether or not businesses would act in an unethical manner. Candidates mostly included relevant examples of unethical behaviour, many of which have been reported globally such as the recent VW issue with fume emissions which demonstrated that many candidates are keeping up to date with world business events. Strong answers to this question maintained a clear focus on just how unethical behaviour would be likely to damage the reputation of a business. Examples given were frequently of pressure groups raising the awareness of consumers to the unethical activity of a specific business and the impact that might have on sales and customer loyalty. Some candidates did not seem to appreciate the fact that unethical behaviour is not necessarily illegal and focused on how courts of law would take action against businesses. Some of the content referred to poor business behaviour, such as bad customer service, which is not unethical but merely bad business practice. There were some strong responses that also questioned the extent to which unethical behaviour might or might not damage the reputation of a business. Such an approach often referred to the size of the business and how well known it was. These candidates also frequently questioned whether consumers would become aware of the unethical behaviour because if they did not then the issue of damaging the business s reputation would not arise. Some evaluative comment was also made in terms of the nature of the economy that businesses exist in; for example, many candidates wrote that in an undeveloped economy unethical behaviour such as bribing to get contracts might be the way that business is done and that businesses who do not engage in such activity will not survive.

4 Cambridge International Advanced Subsidiary Level and Advanced Level BUSINESS STUDIES Paper 9707/12 Short Answer/Essay Key messages Candidates are reminded that in part of Questions 1, 2, and 4 the command words are briefly explain. Some answers given for this examination simply gave a brief one sentence of explanation. This is unlikely to amount to a sufficiently developed answer. While there is no need to write a mini essay for these answers, there must be evidence of some development of a relevant piece of information in order to satisfy the requirement of briefly explain. Where a question asks for two limitations or advantages or reasons etc. it may well help candidates to clearly distinguish their two answers by writing two clearly separated short paragraphs. Candidates are reminded that as countries and economies develop their service sectors grow. It would be good to see more examples of service sector businesses presented where examination questions allow. General comments There is still evidence that some candidates are not spending sufficient time to carefully interpret the questions before commencing to write answers. This is a real potential investment of time and prevents answers which introduce non relevant material. It also prevents giving only a partial answer to a particular question. Candidates should be reminded to ensure that any specific business context in a question is explicitly addressed. Analysis and evaluation marks will only be awarded if such context information is acknowledged and discussed. Where there is no specific business context presented in a question, candidates must nevertheless apply discussion and analysis to business settings. Comments on specific questions SECTION A Question 1 Most candidates knew something about break-even. A full definition requires reference to the level of output where total costs equal total revenue, where neither profit or loss is made. Only a small number of candidates mentioned the level of output or sales. This part of the question tested a true understanding of the break-even calculation and it was poorly and vaguely answered by many candidates. Some criticised B/E for being an insufficient objective for a firm, not realising that it is a management accounting calculation. The most common answers were that it is inaccurate, only a forecast and subject to error. But there were some good candidates who recognised that external factors could change significantly and affect the B/E calculation, that it is unlikely that fixed costs will remain unchanged at different output levels, that not all costs can be classified neatly into fixed and variable costs, and that it may well be unrealistic to assume that all units of production are sold. Question 2 Piece-rate payment method is very well understood. Those who correctly defined piece-rate payment in part were usually able to state at least one disadvantage for employers. Many were able to cite quantity at the expense of quality, that there

5 Question 3 Cambridge International Advanced Subsidiary Level and Advanced Level might be unplanned overproduction, and that there might be a high labour turnover or absenteeism through a demotivated workforce. Unfortunately some candidates misread the question and discussed disadvantages for employees rather than for employers. This question was well answered. Some candidates clearly had information and understanding relevant to this question but were unable to develop points effectively. Small businesses were said to contribute to employment levels but often opportunities were missed to develop the implications of these extra jobs for increasing standards of living and taxation contributions to governments. Many candidates also only see small businesses as sole traders and small partnerships. SMEs can of course be quite significant businesses and employ many people. Question 4 Very few candidates knew the meaning of intellectual capital. Strong candidates were able to give an adequate definition by saying that it is an intangible asset and by giving an example such as the knowledge, training and skills of the workforce. Most candidates were able to give a partial answer to this question by referring to the purchase of machinery, but the answers were very general on the whole and some did little more than repeat the question. Many failed to write their answers in the context of business operations. Strong answers recognised the importance of capital as a business investment resource and explained how it could contribute to more efficient and effective production processes. Intellectual capital in the form of an intangible bank of expertise, skills and competencies has the potential to give business processes a distinctive and competitive edge. SECTION B Question 5 This was a very popular question and most candidates were able to give good answers. Strong answers recognised the importance of employee motivation as a management objective that impacts on productivity and business efficiency. A motivated workforce can mean low labour turnover, low absenteeism and high productivity. Weaker answers discussed how motivation can be achieved rather than saying why it is an important objective of managers. Most candidates were able to describe and discuss the assumptions behind the Taylor economic man theory of employee motivation. However many answers did not discuss the adequacy of this approach as an explanation of motivation. Strong answers analysed the Taylor approach and considered other theorists. A comparison was often made between Taylor and Maslow. The lower order needs of Maslow were compared with the focus of Taylor on money as a motivator. Answers then went on to identify higher order needs that were ignored by Taylor. Such answers showed clear thinking and an ability to compare, analyse and evaluate. Question 6 This was the least popular of the essay questions. Many of the answers to this question confined themselves to a comparison between primary and secondary research methods. Strong answers used a simple structure of market research benefits and market research limitations to plan the answer. An initial discussion of the potential value of effective market research in reducing risk, in producing market intelligence, in producing information for business decision making provided a platform for identifying and analysing some potential limitations of market research activity such as inappropriate methods, inadequate objectives and imperfect results. A discussion based on such a simple outline structure provided many opportunities for very effective analysis and evaluation. Question 7 This was a popular question. Most candidates had some idea of what a social enterprise is, although there is still some confusion between social enterprises, charities and the public sector. It is pleasing to see that the

6 Cambridge International Advanced Subsidiary Level and Advanced Level triple bottom line is quite well known and the stronger answers unpacked this concept to make an incisive comparison between social enterprises and other private sector businesses. Strong answers focused on the opportunities for an entrepreneur to succeed as a franchisee or as an independent restaurant owner and carefully discussed and analysed the advantages and limitations of these two options. Many answers however simply discussed the franchise business model with little or no restaurant context. Such responses led to a quite limited approach to this question. The independent restaurant ownership option was largely ignored by many candidates as they focused almost exclusively on just a partial interpretation of the question.

7 Cambridge International Advanced Subsidiary Level and Advanced Level BUSINESS STUDIES Paper 9707/13 Short Answer/Essay Key messages Candidates are to be reminded that the command words for part of Questions 1, 2, and 4 are briefly explain. Answers which simply present a simple single sentence are unlikely to contain development or examples sufficient to support the requirement of briefly explain. A mini essay is not required, but there must be evidence of some developed explanation in order to secure maximum marks for these questions. If a question requires two advantages or limitations or reasons etc. then candidates are advised to write two clearly separated paragraphs. Candidates are reminded that as countries and economies develop, their service sectors grow in importance. It would be good to see more examples of service sector businesses presented where examination questions allow. General comments Many candidates demonstrated a sound knowledge of the syllabus content assessed in this examination. However, there was some evidence of a relatively weak understanding of certain parts of the syllabus by some candidates. This was evidenced by the responses to Questions 2 and and Question 3. These questions focused on some key fundamental concepts in the Operations & Project Management and Finance & Accounting sections of the syllabus. Candidates are reminded of the value of leaving a little time at the end of writing an essay answer in order to construct a meaningful conclusion section. This should give an opportunity to make some concluding analytical and evaluative comments. Comments on specific questions SECTION A Question 1 There were many candidates who were unsure about this concept. Instead of giving a precise definition of internal growth based on organic growth through the expansion of existing operations, some answers focused on vague and imprecise definitions more relevant to notions of growing a business or discussions of growth per se. Strong answers contrasted internal growth possibilities with external growth opportunities through acquisition and merger. Many candidates were more confident in this part and showed good knowledge and understanding of why businesses see growth as an important objective. Good contextual examples were also often given. However, while some candidates stated two relevant reasons for growth, there was often little supporting explanation or development. Question 2 Candidates generally fell into two camps in defining process innovation those who correctly defined the concept as the use of a new or improved production or service delivery method, and those who incorrectly confused the concept with new products. The strongest answers used examples of process innovation, such as robotics and CAD/CAM, to show how efficiency gains could be achieved in a business. Weaker answers identified process innovation possibilities but gave no supporting explanation.

8 Cambridge International Advanced Subsidiary Level and Advanced Level Question 3 This proved to be a very challenging question for many candidates. The accountancy based terms revenue expenditure and capital expenditure were not accurately defined by many candidates and as a result the importance of the distinction between the terms for a business was often not recognised or discussed. Some answers got the terms the wrong way round, while others confused revenue expenditure with sales and/or income. Strong answers accurately defined both terms and then explained the importance to businesses in terms of financing each type of expenditure and of treating them differently in the final accounts. Question 4 This was very well answered by many candidates. This question was also confidently answered, although some candidates did little more than give a detailed definition of autocratic leadership rather than briefly explain two advantages of this type of leadership for a business. Relevant advantages identified and explained in strong answers included reference to the speed of decision making where a quick response is required and to the value of close supervision and control to secure business organisation consistency and a focus on objectives. SECTION B Question 5 The strongest responses to this part clearly defined a USP as a product or service differentiator that sets a business apart from competitors. Such answers then gave examples and applied the concept to the 4 Ps, notably to product, price and promotion. Weaker answers were much more general and lacked specific application to an explicit marketing context. The strongest answers to this part discussed specific ways in which customer relations might be improved in a retail store. Many candidates referred to human resource techniques such as improved training and more effective recruitment strategies. Thoughtful answers often distinguished between short and long term ways to improve the relationship between a customer and the business and made evaluative comments on the possibility of strengthening customer satisfaction and loyalty. Question 6 This was not a popular question. There were however some good responses. Strong answers analysed what each of the three named departments did in a business organisation and then applied this analysis to cooperation with an Operations Department. Perceptive answers recognised how each of these three departments had the potential to make a significant contribution to the working and success of an Operations Department and consequentially to the success of the overall business. Question 7 Sound answers to this part recognised the many and varying functions of business managers and used a management theorist such as Mintzberg to describe and analyse these functions. Weaker responses gave quite general explanations of the role and functions of management with little or no analysis of impact or significance for business performance. Most candidates demonstrated a very sound understanding of emotional intelligence in answer to this question. Strong answers to this question effectively examined the production worker context given and used concepts such as Theory X managers, and workers responses to Theory X managers, to determine the relevance of emotional intelligence to a production worker context. Such answers provided opportunities to really question the usefulness and significance of emotionally intelligent supervisors in a production line scenario.

9 Cambridge International Advanced Subsidiary and Advanced Level BUSINESS STUDIES Paper 9707/21 Data Response Key Messages Encourage candidates to use the context to support their responses. Identify what analysis and/or evaluation is appropriate to a question practise these skills. Candidates can demonstrate application and analysis with a few well developed points especially in parts (c) and (d). Remind candidates to be aware of the marks available for each question so that they do not spend too long on shorter questions but devote adequate time to analytical and evaluative questions. Advise candidates that copying data from the case study is not necessary. In Question 2(c) data was simply copied or described without linking to the limitations of using accounting ratios. Ensure full understanding of the command words. Practise 3-mark explain questions and get students to produce their own list of words/definitions/ explanations with examples. General Comments The case material for both questions seemed to be well understood. There seemed little difficulty with understanding the questions set although some candidates tried to answer Question 2(c) with reference to the use of accounting ratios rather than the limitations of using accounting ratios. Candidates are missing opportunities to: Use the context this is a data response paper Identify opportunities to analyse it is always possible to develop the data further Identify opportunities to evaluate 1(d) required a justified discussion of the benefits of investing in process innovation for PC. There was no apparent evidence of time being an issue with most candidates. Candidates, on the whole, have a good grasp of business terminology and are able to express themselves effectively. Comments on Specific Questions Question 1 (i) Candidates could identify the relevant characteristics of a private limited company, such as limited liability, continuity and legal identity. They were able to distinguish a private limited company from a public limited company by stating shares bought by family and friends and/or shares are not available on stock markets. Most candidates managed to give good explanations of managers roles and responsibilities. Good answers developed their explanation further by, for example, giving examples of different kinds of managers (HRM, Marketing manager, etc.) or stating that managers work towards achieving company objectives to demonstrate a good understanding. There is no need for context in answering part.

10 Cambridge International Advanced Subsidiary and Advanced Level (i) (c) (d) The correct answer of Gross Profit Margin (GPM) was given by many candidates. Common errors were to arrive at an answer of 14.3% [or 14.3], i.e. (Net) Profit Margin. Almost all candidates made an attempt and managed to score a mark on stating the equation for GPM, identifying the gross profit or dividing by sales revenue. Candidates demonstrated understanding of how to improve GPM by increasing sales through promotion, increasing selling price and finding a cheaper supplier. Level 2 answers applied to the case by including reference to, for example, reducing wastage (throwing away $1000 of dog food) and reducing the high level of inventory. Candidates needed to use the information in the scenario and data provided. Most candidates showed understanding of cost based pricing and could discuss the effect on prices and use the information on the characteristics of the local market. The disadvantages appeared to be readily discussed and the context incorporated into these discussions. Better answers could also discuss the advantages in context. Many candidates saw this question as an opportunity to write everything they could about process innovation sometimes using examples of manufacturing industries rather than the business in the data given. Many candidates recognised that process innovation involved a change in operational methods and hence managed to identify the benefits of process innovation in context and analysed the benefits in context. Strong candidates managed to give a justified evaluation/judgement based on contextual analysis. Question 2 (i) (i) (c) (d) Most candidates managed to gain reward by stating owned by individuals/groups and not owned or controlled by state/government. Some managed to give examples of private sector organisations or stated that the profit motive is more relevant in the private sector than the public sector. This part was well answered. Candidates demonstrated good knowledge of labour intensive as opposed to capital intensive and that the job was done by employees/workforce. Some managed to give an example of labour intensive. Weaker answers failed to define labour as employees/workforce. The correct answer was given by many candidates. Common errors were to arrive at an answer of 8.3% [or 8.3] by using the 2013 figure, or getting an answer of 18.3% [or 18.3] by adding 2013 and 2014 figures, or getting an answer of 9.1% [or 9.1] by averaging 2013 and 2014 figures. Most candidates could identify the disadvantage(s) of rising labour turnover but failed to explain the disadvantage of rising labour turnover in CM (labour intensive production). Many candidates managed to compare the accounting ratio(s) of CM and competitor X and stated which one had higher or lower accounting ratios. They scored marks on showing the understanding of the use of accounting ratio(s) in context. Better candidates managed to identify the limitation(s) of using accounting ratios in context and used examples from the information in the paper. A significant number of candidates simply listed the benefits and drawbacks of job rotation. The majority of answers showed good understanding of job rotation and its use as a motivational tool. Strong answers considered the application to CM and based their evaluation on good contextual analysis.

11 Cambridge International Advanced Subsidiary and Advanced Level BUSINESS STUDIES Paper 9707/22 Data Response Key Messages Many candidates used the context of the data. However, candidates sometimes just repeated or quoted from the data and this cannot be rewarded in this examination. Candidates also demonstrated analysis in response to questions 1(c), 1(d), 2(c) and 2(d). However much of this analysis is basic and lacks either context or depth. To show good analysis candidates must use the context of the data to show sequential analysis: leads to which may also lead to. The end point of good analysis will be the effect on the stakeholder or business. Centres must continue to prepare candidates to respond at the right level for each question: Part required an explanation without using the data. Each part has three marks and candidates should aim for a detailed definition and an example, not related to the data as this will often show no understanding, especially as it may be copied from the text. Part required calculation and then use of that calculation in context. When a candidate is told to use or refer to their earlier answer they must do this. Part (c) required analysis in context. Candidates should aim for two well analysed points and a good answer does not require a conclusion or any evaluation. Part (d) required evaluation based upon good analysis in context. A good answer will often benefit from a conclusion. Evaluation continues to be rare in candidates responses to questions 1(d) and 2(d). Those candidates who do manage to gain some evaluation marks often try to cram it all in at the end of the response and it ends up being rushed and weak. Any question that requires an evaluative response will require candidates to answer the question. Some evaluative command words include: To what extent a judgement is required over the extent to which something happens or is true. Discuss a judgement over which side of a discussion/argument is most compelling Evaluate a judgement over the benefits/costs/validity etc. of something Recommend a judgement about the best/most appropriate/suitable solution General Comments Paper 2 is a reasonably time pressured examination where candidates must have a good sense of timing to complete all the questions within the given 1 hour 30 minutes. Most candidates were able to answer all of the questions on the examination and there were fewer timing issues than in previous sessions. The contexts of Popular Presents (PP) and Kitchen Quality Appliances (KQA) both proved accessible and candidates did not struggle understanding the markets involved. The fact that PP was a new business gave candidates a basis for their answer to Q1 and Q1(d) and this was used well. However the capital intensive manufacturing nature of KQA could have been used more effectively in Q2 and Q(c) to allow candidates to access higher marks. It is essential that candidates look for the characteristics of each business, upon which the data is based, to find what makes it different. This should form the basis of application, analysis and evaluation in an answer. A response to a longer question (parts (c) and (d) on both questions) which does not include some elements of the data cannot receive any contextual marks and as such a candidate is unlikely to achieve a high grade on the paper. Teachers should look for context which distinguishes an answer from a generic answer. An answer without context is unlikely to achieve higher than half marks in the examination.

12 Comments on Specific Questions Question 1 Cambridge International Advanced Subsidiary and Advanced Level (i) (i) (c) Candidates generally knew what was meant by a unique selling point and most candidates were able to show a reasonable level of understanding in their answers. It is always sensible to use an example in these explanation questions, however too many candidates simply quoted directly from the data to show their understanding. Although PP does have a unique selling point, there is no further understanding shown by a candidate by quoting the data. If candidates wish to give an example (which good answers often do) then the examples should not be based on the business in the data. Most candidates could identify the important elements of cash flow but it was rarer for candidates to be able to show an understanding of the future nature of a cash flow forecast. Centres must practise answering questions fully, including each element of a term which requires explanation; in this case both cash flow and forecast. Most candidates made some attempt to calculate the gross profit, although there was varying success with techniques used. Candidates could use a number of techniques to calculate the gross profit but in the cases where the answer was incorrect it is vital for the examiner to be able to follow the logic of a candidate s answer. To be able to gain marks for partial calculations, or where a candidate has made an error of calculation, there must be more than just random numbers written as an answer. Most candidates understood what was meant by the term penetration pricing but not all could identify and explain a disadvantage of the technique. This disadvantage needed to be in the context of PP not just a generic disadvantage of penetration pricing. The data provided plenty of context upon which to base a good answer. PP is a new business without a cash flow forecast and strong competition. Also it is utilising a low pricing strategy and Jack seems to have little market research. All of these elements (and more) could have easily formed contextual analysis and good candidates took two of these factors, explained the effect on the business and analysed the impact that might lead to PP failing in the first year. Candidates had obviously learned a set of factors which could lead to business failure and if these were stated without context this limited the mark awarded. This question was generally well answered by candidates, however there were still some candidates who seemed to jump to answering the question without fully reading and understanding the data about PP. Questions like this are led by the data good candidates did not waste time explaining the theory behind factors which could affect any business but went straight into application and explained the most likely factors to affect PP. Analysis in this question required candidates to show how this factor was likely to lead to a lack of success for PP. It was not enough to merely state a factor could lead to failure. Candidates needed to show the steps that PP might face and encounter and how this could eventually lead to failure. It was too common to read an answer where a candidate stated that a lack of cash flow forecasting could mean that PP does not survive without any attempt to show how this might happen.

13 Cambridge International Advanced Subsidiary and Advanced Level (d) Most candidates knew about sources of finance. Most candidates were able to name and explain a number of sources of finance. However too many candidates spent a great deal of time going through every source of finance they had learned about, without thinking about the most appropriate for PP. This led to long answers that often only scored average marks. Question 2 Once again the key to this answer was context. In this case PP is a newly established business with no track record and an inexperienced owner. For example, most candidates suggested a bank loan might be appropriate and this could have led to effective analysis as long as the candidate analysed why Jack might find it difficult to obtain one. The question asked candidates to discuss additional suitable sources of finance. Therefore a minimum of two sources of finance were required to be analysed and then evaluated to gain full marks. Three sources would not be an unreasonable number of sources of finance to analyse and evaluate within the time and candidates who made a judgement between their chosen sources of finance based on contextual good analysis were rewarded well. (i) Portfolio analysis appears in the AS specification as a way of achieving marketing objectives. Candidates could, therefore, explain the term as an analysis of any element of the business that might allow it to achieve these objectives. An obvious route was to suggest that a business would look at the advantages and disadvantages of the range of products, markets or production methods. Again with a two-word term, it is necessary to fully define both aspects. In this case there were many tautological explanations using the word analysis to define itself. This will not be rewarded as an explanation of the term. (i) (c) Most candidates understood and could explain the term shareholder. However some failed to understand that shareholders are only owners of companies. There were a few candidates who confused the term with stakeholder. Most candidates understood that the question called for a measure of the liquidity of KQA, but many confused the acid test ratio with the current ratio. This question asked for the implications of the change in the acid test ratio, not for the causes of the change. Some candidates spent a great deal of time describing the change in the acid test ratio and then explaining possible causes for the change. This was a waste of valuable writing time. Centres must prepare candidates to answer the question that they are given. The implications for the business needed to be in the context of KQA. Economies of scale was a well understood topic and candidates could generally identify a number of economies to explain. There were some good attempts to place these in the context of KQA, especially when discussing managerial economies of scale and technical economies of scale. There were a few candidates who struggled to distinguish between economies of scale and other benefits to a firm of growing larger. The key aspect of an economy of scale is the decrease in average or unit costs that occur and some candidates missed out this essential piece of knowledge which impeded their analysis. An analysis question such as this requires a minimum of two aspects analysed. There is some logic to a candidate trying to analyse three to make sure that they are not providing the bare minimum, but candidates who attempt to analyse many more than this will often run out of time to spend on other questions. The quality of the analysis, in context, is the important issue, not the number of economies of scale chosen.

14 Cambridge International Advanced Subsidiary and Advanced Level (d) To be able to answer this question candidates must first identify the problems in the data. This should be the starting point for the answer and the candidate s knowledge of Business Studies will provide ways in which human resources could solve these problems. Unfortunately many candidates started with the role of human resources and analysed the usefulness without every referring to the problems of KQA. This type of answer lacks context. For KQA the problems were fairly straightforward in terms of lack of skilled employees, difficulties in recruitment and quality control, as well as the production targets and impacts of growth. These were outlined in the data and any reasonable human resources approach to solving these problems was credited. This allowed candidates to take many different approaches and still be correct. This, therefore, highlights the importance of the skills of analysis and evaluation in an answer and this is where centres need to focus when preparing candidates for these longer answer part (d) questions.

15 Cambridge International Advanced Subsidiary and Advanced Level BUSINESS STUDIES Paper 9707/23 Data Response Key Messages Context is the key to good analysis and evaluation. Candidates need to be selective in their use of knowledge, what they analyse and the conclusions that they come to based on the business in the data given. For example in Question 2(c) many candidates just wrote down everything they knew about the 4Cs, rather than being selective in their analysis of the role of the 4Cs based on the context of Wonderful Windows. It is not unreasonable for a candidate to spend 5 10 minutes of the examination reading and understanding the data they should not start writing their answer as soon as the examination begins. Candidates must read the questions thoroughly. Each question is a set of instructions which, if understood and followed, should prompt an excellent answer. Candidates also demonstrated analysis in response to questions 1(c), 1(d), 2(c) and 2(d). However much of this analysis is basic and lacks either context or depth. To show good analysis candidates must use the context of the data to show sequential analysis: leads to which may also lead to. The end point of good analysis will be the effect on the stakeholder or business. Centres must continue to prepare candidates to respond at the right level for each question: Part required an explanation without using the data. Each part has three marks and candidates should aim for a detailed definition and an example, not related to the data as this will often show no understanding, especially as it may be copied from the text. Part required calculation and then use of that calculation in context. When a candidate is told to use or refer to their earlier answer they must do this. Part (c) required analysis in context. Candidates should aim for two well analysed points and a good answer does not require a conclusion or any evaluation. Part (d) required evaluation based upon good analysis in context. A good answer will often benefit from a conclusion. Evaluation continues to be rare in candidates responses to questions 1(d) and 2(d). Those candidates who do manage to gain some evaluation marks often try to cram it all in at the end of the response and it ends up being rushed and weak. Any question that requires an evaluative response will require candidates to answer the question. Some evaluative command words include: To what extent a judgement is required over the extent to which something happens or is true. Discuss a judgement over which side of a discussion/argument is most compelling Evaluate a judgement over the benefits/costs/validity etc. of something Recommend a judgement about the best/most appropriate/suitable solution General Comments Candidates must have a good sense of timing to complete all the questions within the given 1 hour 30 minutes. Those candidates who did suffer from timing issues generally had spent too long on one of the longer questions and ran out of time for question 2(c) and 2(d). A response to a longer question (parts (c) and (d) on both questions) which does not include some elements of the data cannot receive any application marks. When assessing work within a centre, teachers should look for context which distinguishes an answer from a generic answer.

16 Cambridge International Advanced Subsidiary and Advanced Level Centres should prepare and practise the use of unseen data before the examination. A good technique can be to read the data, read the questions and then to go back to the data again. This process is likely to take 5 10 minutes of the examination for both questions, but it will produce responses that are more likely to demonstrate good analysis and evaluation. Comments on Specific Questions Question 1 (i) (i) (c) Candidates generally had a good understanding of the term sole trader and could identify the most important aspects of an explanation. This question was well completed. The data stated that CC operates in a niche market. Therefore an explanation of the term niche market should not repeat the data as this shows no understanding of the term. If candidates want to give an example to show some understanding then a different example should have been used. Most candidates could identify that niche markets were often small but less could explain that a firm in a niche market targets a relatively small segment of the entire market. To answer this question candidates needed to have a knowledge of what contribution is and how to calculate it. Most candidates knew that this required some use of the cost and revenue figures. Many were able to calculate the direct costs but then going the extra steps to calculate contribution was more difficult. Candidates should set out their answer in a clear and easy to follow way. Candidates who give a wild array of calculations and figures with little logic to the way they are set out on the page are unlikely to be rewarded, unless they get the right answer. There are many potential answers to why accurate cost data is important to a business, but when looking at the specific case of CC some of these answers are relevant and others are less so. Too many candidates gave a generic answer that could apply to any business and relatively few attempted to place the importance in the context of CC. If a question mentions the name of the business then it must be answered in the context of the business. Most candidates had some knowledge of e-commence and there was reasonably good application to how CC could use e-commerce. However this question asked candidates to analyse and this required candidates to analyse the issues that CC should consider. Therefore this was not asking for an analysis of the advantages and disadvantages of e-commerce, but a more targeted approach that was about the issues specific to CC and how these might help or hinder the business with their new product range. The data mentions that CC will need to purchase a computer controlled sewing machine if CC goes ahead with e-commerce and too many candidates focussed on this in their answer. Whilst the sewing machine could have been brought into a good answer, in terms of meeting the demand and delivery estimates required for e-commerce, too many candidates spent their time discussing the advantages and disadvantages of purchasing a computer controlled sewing machine. This was not answering the question and led to unfocussed analysis. Candidates must focus on the question that has been set. In this case the focus of the analysis is the issues CC should consider when deciding to use e-commerce for selling the new product range. Any analysis that falls outside of that instruction is a waste of a candidate s time and efforts in the examination. (d) Most candidates had some knowledge of batch production and were able to give some generic advantages and disadvantages of its use. Fewer candidates were able to place their knowledge of batch production into the context of CC and even fewer were able to develop their points far enough to gain good analysis. A superficial analysis in terms of batch production may lead to poor quality compared to job production is not good enough for this examination. Candidates must be able to take their analysis further to show the various impacts and the overall impact on the business. In an evaluative question such as this, they must also be able to make some form of judgement about the likelihood or extent of the impact and what this might depend upon.